Seasoned Trade Lines

Many individuals seem to get caught up on their three-digit credit score, but the score itself doesn’t mean a whole lot if there aren’t any “seasoned trade lines” to back it up.

First let’s start with a simple definition.  Seasoned trade lines are lines of credit, whether they’re credit cards, auto loans/leases, home equity lines of credit, etc, that have been open and active for at least 24 months. Anything short of two years carries little if no weight when applying for a large loan such as a mortgage.

A borrower may have an 800 credit score, but their credit report could be free of seasoned trade lines, basically turning what seemed like excellent credit into questionable credit status from the lender’s point of view.

Most people don’t realize that credit depth is a major aspect of the credit scoring model, for both FICO scores and VantageScores, and also a major determinant in deciding if someone will qualify for a loan, credit card, or a mortgage.

Let’s look at an example to illustrate:

Borrower A:

680 credit score
10 total trade lines
6 seasoned trade lines

Borrower B:

740 credit score
3 total trade lines
0 seasoned trade lines

Now suppose that both Borrower A and Borrower B apply for a home loan with the same lender, assuming they have a similar borrowing profile aside from their credit history. In other words, their jobs, income, and assets are on par with one another.

Based on those attributes they should both get approved for a loan, though their interest rates may vary thanks to their credit scores.

While Borrower B clearly has the higher credit score, Borrower A has seasoned trade lines on their credit report, and will have a much better chance of qualifying for the home loan.

In fact, Borrower B will have a very difficult time obtaining a home loan, and could easily get denied based solely on the fact that they don’t have enough seasoned trade lines.

*Many lenders require a minimum of 3 open and active trade lines with at least a 24-month history.

So before you tell everyone about your perfect credit score, you may want to look beyond your credit score to measure your creditworthiness. After all, a bank is much more willing to lend to someone who has displayed a greater deal of credit responsibility over time than someone who is new to the credit game.

It’s perfectly logical. Would you rather lend to someone who has had a credit card for a few months, or someone who has managed credit cards responsibly for several years? The takeaway is that there’s no rushing good credit.


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